Policy changes in social housing and welfare

We are seeing the most profound changes to social housing policy in decades. CHISEL tenants, and CHISEL as an organisation, will be deeply affected.

The situation is constantly changing, so we will try and keep this page as up to date as possible. Recent events will be highlighted in News near the top, and the main text will be updated when necessary.

We will add links to more information as guidance – please note that CHISEL is not responsible for content on other sites.

The two main policy aims of government since 2015 have been to reduce welfare benefit costs, and to encourage home ownership – but since the change in Prime Minister in 2016 and especially since the 2017 election, the government is taking some different approaches about how to achieve them, and giving more of a role for social rented housing than previously.

An update on the three headline measures in housing – as things stood in late November 2017:

Rent Reduction: a 1% decrease in cash terms each year for 4 years. The first decrease was in April 2016, and will continue for the next 3 years till 2019-20. The government has announced that from 2020-21 rents will increase by inflation (CPI) + 1 %.

Voluntary Right To Buy – moving ahead slowly, but delayed while a second pilot tests the more complex parts of the scheme. This pilot starts in July 2018, lasting 2 years, and will be in the Midlands, so we do not expect any national scheme till 2020 at the very earliest.

Pay to Stay: the scheme to allow social landlords to charge higher rents to higher income tenants is now voluntary for both Councils and housing associations. This now means that both Councils and associations can choose whether or not to bring in Pay To Stay. CHISEL’s Board has no plans to introduce Pay To Stay at present.

Deregulation: in October 2015, the Office of National Statistics reclassified housing associations as public bodies; this meant that £60bn of housing association borrowing was added to the national debt. In response, government has now committed to deregulating housing associations and reversing the classification, so they return to being private non-financial corporate bodies, governed by their Boards. The ONS said in late 2017 that subject to some small legislative changes being made, housing associations will return to being treated as private sector.

News:

22 November 2017: the Budget announces funding for a regional pilot of the Right To Buy scheme for housing association tenants, to take place in the Midlands for 2 years starting in July 2018.

The 2017 budget also confirmed that the Government will not be proceeding with the introduction of Local Housing Allowance rates (including the Shared Accommodation Rate for people under 35) for Housing Benefit or Universal Credit entitlements in the social rented sector. This welcome change removed a restriction to support for people under 35. especially in 1 bed flats.

23 Nov 2016: the government’s Autumn Statement announces that Pay To Stay will be voluntary for Councils, as it is already for Housing Associations. The Voluntary Right To Buy for housing association tenants will have a full pilot in a region of England during 2017-18, so is not expected to be rolled out nationally till April 2018 or later.

12 May 2016: The Housing and Planning Act receives the Royal Assent and becomes law. More detail about the Act on Wikipedia.

15 Dec 2015: government announces that decisions about Pay To Stay for housing association tenants will be left up to individual housing associations.

Policy Changes under the 2015 Conservative Government

The new government hit the ground running with an emergency budget in July 2015, which announced the biggest changes in social housing in decades.

The government had two main policy aims: to reduce welfare benefit costs; and to encourage home ownership.

Deregulation

In October 2015, the Office of National Statistics reclassified housing associations as public bodies; this meant that £60bn of housing association borrowing (until then considered to be in the private sector) was added to the national debt. In response, government has now committed to deregulating housing associations, and has already changed some of the policies announced in the budget.

Rent Reduction

4 years of rent cuts starting 2016 will mean that by 2019 CHISEL’s rents will be about 13% lower than they would have been under the previous formula (which was inflation + 1%) and therefore our annual income will be about £160,000 less than expected. This will impact on our long-term financial planning.

What is CHISEL doing to manage this change?

Increase our income: we have already done this by creating more housing to rent for single sharers. Deregulation may also give CHISEL more freedom in rent setting.

Reduce our expenditure: CHISEL is always looking at ways to get better Value For Money. CHISEL is a fairly lean organisation already, so savings will not be easy in most areas of expenditure. CHISEL have three main cost areas:

Loan repayments on properties – which largely depends on inflation

Staffing Costs – we run on less than 4 fulltime staff at present

Maintenance Costs – but savings here might cost more money in the long run…

Hard decisions will have to be made, but we really do not want to reduce the amount of expenditure on maintenance, as it will ultimately cost us more money in the long run if we do not upkeep our homes. This would be a decision of last resort.

Voluntary Right To Buy

The extension of the right to buy to housing association tenants was an election promise.

The National Housing Federation (NHF – the trade body for housing associations) agreed with the Government to voluntarily introduce Right To Buy, which avoided it becoming part of legislation, hence the name Voluntary Right To Buy (VRTB). The NHF has been working intensively with civil servants to create a workable scheme. There was an initial pilot by five housing associations in different parts of England. The 2016 Autumn Statement announced a larger regional pilot, which will be outside London, probably in the West Midlands, and is likely to take all of 2017-18.

Based on the information we have today, the earliest the scheme will come into being for housing association tenants nationally is April 2018. The start date for the national rollout will depend on how the pilot goes, as will the exact detail of the national scheme, including eligibility criteria i.e. how many years you need to have been living in social housing to qualify. Discounts are planned to be up to £103,000 in London and £77,000 outside London, depending on property value and the length of your tenancy to date. The government plan is for the VRTB discounts to be funded by the forced sale of high-value Council properties as they become vacant, but this has also been delayed by at least a year. The regional pilot will be funded by central government.

The regional pilot will test two of the most complex areas of the scheme which the first pilot did not include: portable discounts and one-to-one replacement.

Portable discounts: housing associations may not be able to sell some of their properties, or may choose not to, for various reasons. In that case, the plan is that eligible tenants who are unable to buy the property they live in will take their discount and use it to buy another housing association property, possibly from a different association.

One-to-one replacement: part of the deal made with government is to maintain the stock of social housing; every property lost by sale should be replaced by a new unit, funded by the proceeds of the sale.

Impact of the Right to Buy – nationally

The NHF estimates that about 221,000 HA households will be eligible for the new proposal and could afford a mortgage. If all of these take up the scheme it will cost £11.6 billion in discount. The money needed to finance this discount is to be raised through the forced sale of high value council homes when they become vacant. This element of the scheme is part of the Housing and Planning Act 2016.

What is the benefit of the Voluntary RTB deal?

The voluntary deal allows associations to determine what property they sell, and is based on the promise that associations will receive the full market value of the sold property. In theory, this will enable associations to build like-for-like replacement properties. Associations are expected to provide replacement homes within 3 years of the property being sold, or lose the money.

What is the likely impact of the Right to Buy on CHISEL?

We estimate that we could lose between 16-20 properties – more likely to be houses than flats. There will be an impact on staff resources and costs associated with processing sales and managing leasehold properties, and service charge accounts; and more complex maintenance arrangements.

Pay To Stay

The government announced on 15 Dec 2015 that it will now be left to housing associations to decide their own policy on Pay To Stay. Pay To Stay is shorthand for charging higher rents to higher income tenants, and would be a gradual rent increase as income increases, up to market level rents. This devolution of responsibility to individual associations is part of the deregulation necessary to move housing associations out of the public sector.

CHISEL’s Board will decide CHISEL’s policy on Pay To Stay – at present there are no plans to introduce it, but the power to do so remains if the Board decides it is necessary and would be effective.

Introduction of Pay to Stay is now also voluntary for Councils (announced November 2016).

The government originally proposed that both Council and housing association tenants earning more than £40,000 per annum in London, and £30,000 outside London, should pay rents up to market level. It was planned to be immediate from April 2017. Household income would be assessed on the top 2 earners in the household and include income from benefits.

Legislation will require social tenants to declare their income to their social landlords, and HMRC to have powers to share income information with social landlords.

Welfare changes

Austerity policies mean many benefits continue to be cut, and the new Universal Credit system is now affecting many CHISEL tenants.

Benefit cap: the cap on total benefits paid to a household was reduced to £23,000 in London, and £20,000 outside London, from 7 November 2016. There are exemptions for pensioners, and people in receipt of Working Tax Credit or disability benefits.

Young people: people aged 18-21 making a new claim for universal credit will no longer be entitled to the housing element, although there will be some exemptions (eg people previously in care).

Stop press: This policy was removed in November 2017 – will not happen. Single people under 35 living alone will only be entitled to the Local Housing Allowance for shared accommodation, from April 2018. This will apply to all such people, whenever their tenancy started (this is a change to previous announcements). This cut will affect some younger CHISEL tenants in shared accommodation. It will mean CHISEL have to think very carefully before offering self-contained flats to single people under 35.

Bedroom Tax: the cut to housing benefit for households deemed to be under-occupying continues. 14% of rent is lost if under-occupying by one room, 25% if two rooms. Some of our tenants have been receiving Discretionary Housing Payments from local authorities to make up this difference, but this is meant to be a transitional help, not forever.